Dan Morain: FPPC pulls thread on laundered money

Upon counsel's advice, political operative Joel Fox declined to discuss the $11 million that was funneled to his political action committee last fall, other than to say he had done nothing wrong, and that he had received a subpoena from the Fair Political Practices Commission.

The November election is history. Voters rejected Proposition 32, the anti-union initiative that was supposed to benefit from the $11 million. Labor is going about its business of tapping members for future political campaigns.

But ever so slowly, FPPC investigators are pulling on threads, trying to unravel the mystery and lies behind the $11 million in laundered campaign money that flooded into California three weeks before the November election.

Slowly, the story is emerging. It involves some of the most influential and unlikely players in Sacramento. The case is complex, leading from Sacramento to Virginia to Arizona and back to California. It's a prime example of the need for stricter campaign disclosure laws in California and other states.

Help us deliver journalism that makes a difference in our community.

Our journalism takes a lot of time, effort, and hard work to produce. If you read and enjoy our journalism, please consider subscribing today.

Recall the circuitous route the money took: On Oct. 16, Fox disclosed that Americans for Responsible Leadership, an Arizona not-for-profit group that had never played in California politics, gave $11 million to Fox's Small Business Action Committee to promote Proposition 32, and oppose Gov. Jerry Brown's tax hike measure, Proposition 30.

On Nov. 5, the day before the election and after the FPPC had sued to force more complete disclosure, Fox filed an amended report with the secretary of state's office revising the story of how the money got into the Small Business committee treasury.

In the new disclosure, Fox reported that Americans for Job Security, based in Virginia, was the source of the money – although Americans for Job Security still has not filed the proper forms with California authorities identifying it as a source of the $11 million.

Evidently to cloak the source of the money, Americans for Job Security sent the $11 million to another not-for-profit shell, the Center to Protect Patients' Rights, of Arizona, which passed it to its Arizona neighbor, Americans for Responsible Leadership.

The question remains: where did Americans for Job Security get the $11 million? Suspects include billionaires who spent hundreds of millions to defeat President Barack Obama. Part of the answer lies closer to home.

The trade group American Council of Engineering Companies-California long has battled the union that represents Caltrans engineers. The trade group provided a clue last week by disclosing in a campaign finance report that it gave $400,000 to Americans for Job Security last summer and fall, the biggest donations by the group in a decade.

Paul Meyer, the Sacramento-based director of the trade group, told me that Jeff Miller, a major fundraiser for Republican causes, solicited the money from him on behalf of Americans for Job Security.

Miller is a behind-the-scenes player who is influential, in large part because he is so skilled at raising money. He keeps a Sacramento office, but recently moved to Austin, Texas, where he has made waves by trying to lure California businesses to the Lone Star State.

"He was the guy we communicated with," Meyer said.

Meyer added that he knew the money would be for "issue advocacy" related to an overhaul of the campaign finance system, but was unaware that it would be used to back Proposition 32, a measure that promoters tried to portray as a campaign finance reform.

"The current system is awful," Meyer said.

True enough.

If Meyer didn't know that Americans for Job Security would spend the money to promote Proposition 32, the Sierra Chapter of his trade group seemed to be clear on the concept.

In a Sept. 3 posting on its website, the Sierra Chapter's director urged members to donate to the Yes on 32 campaign. And to be extra helpful, he suggested how they could hide their donations:

"There are two options for donations: directly to the 'Yes on 32' campaign (which will be a matter of public record), or to 'Americans for Job Security' (which will allow the donation to remain anonymous)."

Proposition 32's promoters spent more than $50 million to pass the measure. That forced organized labor to spend $64 million to defeat it, diverting its money from Democratic races, which was the point.

The $11 million was a tactic in conservatives' failed strategy to win the November election. The end justified the means. Americans for Job Security spent $15 million beyond the laundered $11 million to unseat Obama. Americans for Responsible Leadership, the Arizona conduit, spent $5 million to defeat him.

The FPPC investigation will go on for months. Attorney General Kamala Harris could get involved. So will legislators. With Washington divided, there's no chance of fixing federal campaign finance law. There are, however, bills in California to force more disclosure. If ever there were an argument for disclosure, the curious case of the laundered $11 million is it.